Shock wave is coming

Those waging war against American workers are winning. Incumbents of both parties will be losing. The next great change election is coming. The economic and political shock wave will be momentous as budget politics will increase joblessness and reveal with brutality that Washington is out of touch with heartland America and dominated by special interests that voters deplore.

One-fifth of the nation suffers from Depression-like pain. Tens of millions of additional voters know the recession continues for them. Yet the president and Congress seem destined to enact policy blunders that virtually guarantee, based on lessons of economic history, a savage economy through 2012. This makes probable, based on lessons of political history, another great change election directed against both parties.

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The Fed predicts the jobless rate going into 2012 will be near 9 percent. The real jobless rate would be near 17 percent. The misery index, which includes husbands, wives, sons, daughters, mothers and fathers who depend on the jobless, would be near 30 percent.

The GDP for Quarter 4 2010 was lowered last week from 3.3 percent to 2.8 percent because of lower spending by government and consumers, as well as the trade deficit.

2011 brings severe spending cuts and layoffs by state and local governments and intense pressures on consumers from rising food and energy costs. In this economy, major federal spending cuts would repeat the policy mistakes of Hoover after 1929 and FDR in 1937, under pressure from the conservative coalition of his time.

Today there are no significant proposals to create jobs or reduce foreclosures from President Obama, the House, the Senate, Democrats or Republicans, with the jobless rate locked at 9 percent, the real jobless rate locked at 16 percent to 17 percent, the foreclosure rate locked at record numbers and home prices locked at collapsed levels.

The president recently told The New York Times he is not happy with the lack of creative jobs ideas from his team. He is right. Time is short. Truth is hard. Revolving-door millionaires from either party rarely propose big job ideas.

Economic policy today should be to enact job programs that include public spending and major private job-creating tax cuts, which are not being discussed. Fiscal policy should be credible long-term deficit reduction that requires taking on wealthy special interests, which does not happen in this town.

The political explosion will result from voters realizing with brutal clarity what happens to them when programs that create jobs are cut, while programs that enrich special interests are preserved, by a budget process corrupted by special interests.

It is economic folly to repeat the mistakes of the 1930s and cut spending that creates jobs with GDP so low and the jobless rate so high. It is political folly for the president to surrender any major policy or narrative about creating jobs, and for Republicans to declare war against workers and promote actions that destroy jobs.

By November 2012 more jobs will be destroyed, exported and outsourced. Real wages will continue their long decline. Benefits will be further slashed. The real cost of living will rise. Foreclosures will continue. Main Street will suffer. Middle-class pain will persist.

The policy blunders of 2011 will send shock waves against both parties in November 2012. 

Budowsky was an aide to former Sen. Lloyd Bentsen and Bill Alexander, then chief deputy majority whip of the House. He holds an LL.M. degree in international financial law from the London School of Economics. He can be read on The Hill’s Pundits Blog and reached at brentbbi@webtv.net.



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